As expected, capital spending continued its decline from $1.9 billion in 2002 to $1.6 billion in 2003. That helped drive free cash flow to $498.4 million. Since Cox has $7 billion in debt to pay down, growing free cash flow is welcome news. At the same time, quarter-to-quarter growth rates for additional subscriber services weakened. High-speed Internet additions fell, as did digital cable additions. Only digital telephony saw a rise, and it was modest. Additions are good news, declining growth rates are not.
With just 36% of customers billed for two or more services, there is plenty of room for growth. Moreover, with the bulk of the infrastructure in place, the payoff for adding services is high. Reflecting both, revenue is expected to grow 12% in 2004 and capital spending to decline to $1.4 billion or less -- a combination that will boost cash flow.
Some good news: News Corp.
Some bad news: On its website, Cox tells of Disney's
Consider for a moment how ironic it would be if Comcast
Investors trying to sift through the crosscurrents might start with valuation: Cox trades at a rich 41 times free cash flow, and carries $7 billion in debt. And if Cox looks stronger -- at least from a cash flow perspective -- than Charter Communications
It might sound like a cop-out, but rather than try to determine if subscription additions have hit a plateau, or are declining, or just what to make of so mixed a bag of results, it may simply be easier to find a better business mix somewhere else.
Motley Fool contributor W.D. Crotty owns stock in Disney, News Corp., and Pixar.